Brien Lundin: The April attack on gold was market manipulation

The short attack on gold of April 12 and April 15 was almost assuredly a violation. The only question that remains is whether it was a violation of the exchange's position limits -- or a violation of the law.

To explain what I mean, allow me to step back a bit.

My good friend Gene Arensberg follows gold trading on the Comex better than anyone else in the market. Following up on some comments I made in a recent Gold Newsletter Alert, Gene really got on a roll and ended up sharing some amazing analysis with me and a couple of other of our wellknown gold-market friends.

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What Gene did was analyze what happened on those two days in mid-April, based on the initial reports that a 124-tonne initial order, and perhaps as much as 400 tonnes, were sold in an obvious attempt to take the gold market down.

Gene goes through the numbers in detail, and the bottom line is this:

"... In order for the initial 124-tonne sale to have occurred 'legally' it would have had to have been 14 traders, all with zero orders open, all acting simultaneously, all acting independently, in their own self-interest, without colluding with each other to 'sell for effect' or conspiring to foment a price smash.

"In actuality, the chances that there were 14 traders who held zero open orders all acting independently, all throwing their full allowable 3,000 contracts into the gold market within a few minutes of each other are infinitesimally small.

"Much more likely is that the initial sale that triggered the sell-stop putsch in gold was done by a single trader, acting so far outside the position limit regime as to be brazen about it."

So there you have it. Gene goes on in some detail, and again, I urge you to read the whole piece, and his ongoing commentaries, which are outstanding.

As you know, I don't believe that there's day-to-day manipulation of the gold market. But I do believe that certain powers-that-be intervene at key strategic points. The April manipulation may have been motivated by profit rather than politics, or perhaps both. But manipulation it was.
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